Belize Nears Default After Missing $23 Million Bond Payment

By Adam Williams -
Aug 20, 2012

Belize neared default after the
Central American country missed a payment today on about $544
million of bonds and Finance Secretary Joseph Waight said the
government is unlikely to pay during a 30-day grace period.

The government can’t make today’s $23 million bond payment,
Waight said in a phone interview from Belmopan City. Prime
Minister Dean Barrow, who won re-election in March, said a
restructuring was needed after the coupon on the country’s so-
called superbond climbed to 8.5 percent this year from 6 percent
as part of an accord reached with investors in 2007.

“We simply do not have the capacity to make the payment,”
Waight said. “We are hoping to engage with creditors as quickly
as possible.”

Barrow projected that Belize’s fiscal deficit will climb to
2.5 percent of gross domestic product this year from 1.1 percent
after growth in the $1.4 billion economy slowed and the
government took over the telecommunications and electricity
distribution companies.

The price of Belize’s dollar bonds due in 2029 fell 0.25
cent to 34.75 cents on the dollar, according to data compiled by
Bloomberg.

Grace Period

The majority of the country’s bond holders have rejected
three debt renegotiation scenarios published by the central bank
on Aug. 8. Those scenarios include reduction of the 8.5 percent
coupon to 2 percent with a 15-year principal grace period and a
maturity date extension to 2062 from 2029. Other scenarios call
for a 45 percent principal reduction with incremental coupon
adjustments, or a 5-year principal grace period with a 3.5
percent coupon.

“By not paying the coupon, the government is trying to
force bond holders into an exchange that will get investors
pennies on the dollar,” said Joe Kogan, head of emerging-market
debt strategy at Scotia Capital Markets in New York. Kogan
described Belize’s proposal in an Aug. 8 report as “one of the
worst restructurings for bondholders in recent emerging markets
history.”

Belize has hired New York-based law firm Cleary Gottlieb
Steen & Hamilton LLP to advise the government on the
restructuring, Waight said. Cleary Gottlieb aided Argentina in
its debt restructurings following the country’s default on $95
billion of bonds in 2001.